What's Due Diligence and what does that mean to the Home Buyer? With Purchase and Sale agreements in Georgia now a total of 7 pages, without special stipulations or additional amendments there's a lot to know.
Due Diligence is the time for the Home Buyer to do their homework. It's the time to do inspections for termites and other wood destroying organisms, like powder post beetles. It's time to do a home inspection to determine the condition of the home, radon inspections, surveys and appraisals. If you're planning to build you'll want a soil percolation test. It's the time to determine if the home is in a flood plain and if you will be required to buy additional insurance. It's the time to check the sex offender registry to know who your new neighbors might be. It's the time to make sure your mortgage loan is in order and progressing. It's the time to make sure that the home you are buying in Dekalb County is in compliance with the Plumbing Ordinance that went into effect June 2008. If you don't you won't be able to turn your water on.
If during the Due Diligence period the Buyer decides that the house is not for them, the Buyer has a right to terminate the agreement. The Buyer must inform their agent that this is not the right house because of whatever reason they choose. The Buyer must give notice to the Seller of their decision to exercise their right to terminate the agreement before the end of the Due Diligence period. If that is not done, Due Diligence period ends and the Buyer has accepted the property "as is."
The expiration of the Due Diligence period does not terminate any other contingencies that have been added to the agreement.
In the past month, I have been contacted by 2 different Atlanta Home Buyers that wanted to terminate their agreement during their Due Diligence period. They weren't my clients and we had never spoken before. They both told me that their agent was either ‘dragging their feet" or just not returning their phone calls. They were looking for advice and wanted to know what they could do. The first thing to do is to contact the Buyer's Agent, the agent that is representing the Buyer and that the Buyer has signed a Buyer's Agency agreement with. If unable to reach the Agent, contact the Agent's Broker. If they are unresponsive, contact the Georgia Real Estate Commission. This scenario just shouldn't happen. If a Buyer decides that the house isn't right for them, the agent should just do the termination and release. Why drag it out? Get the paperwork signed and go find another house.
The termination and release agreement is a simple 1 page document. It's get signed by both parties meaning the Buyer and Seller and everyone can move on.
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It's amazing how an ostrich can get a license these days...
We do not have a due diligence time period here in NJ. We have basically three times when the buyer can terminate the contract. First they have the attorney review period. Second they have their inspection period. And third, if they are getting a mortgage, if for some reason they do not qualify and rely on the mortgage for their purchase, they can terminate the contract also.
Jen, I have to ask the Realtors around here if we have a due diligence period, because I have not heard of it before. Glad you explained it, now I will at least know what it is the next time I hear it.
Hey Jen,
I like what you said about cancelling the contract and moving forward. Another excellent point was the non-responsiveness of the other agents. Ultimately, service is truly what wins in this industry. Unfortunately, most consumers do not know how important service is until they are not getting it.
Marvin, so true!
David and George, I figured Due Diligence was everywhere. It's always interesting to hear how other states do things.
Khash, Thanks! Good service is critical in this business.
Thanks everyone for your comments.